Teacher Pensions Blog

We get it. Pensions can be a complicated topic. But the teacher workforce is too large--and too important--to ignore how well today's retirement plans are meeting their needs.

To help teachers and the general public understand how pensions work, we created a simple, 3-minute video explaining how teacher pension plans work and how they affect millions of public school teachers.

Glass ceilings aren't limited to the workplace, unfortunately. Because most states offer teacher retirement benefits based on their salary, states are extending the gender wage gap into retirement. Here's how.

The majority of teachers (76 percent) are female. The majority of superintendents (about 75 percent), however, are male. A recent Education Week piece dives into the reasoning behind this discrepency, but rather than dig into the barriers female school leaders face, let's look specifically at the retirement issue.

Most states enroll all educators--teachers, principals, and superintendents--into one state pension plan, and it's usually named the "teacher" plan. But the largest payouts from "teacher" pension systems aren't actually going to teachers, the majority of which are female. Instead, the biggest winners are long-serving, highly paid administrators, who are predominantly male.

In 2014, we covered the release of the Empire Center's New York state pension database; the site lists the pension and services years of every current recipient. We found that, despite its name, the New York State Teachers' Retirement System (NYSTRS) writes its largest pension checks to administrators -- not teachers. In 2014, 14 out of the 15 highest retirement payments (ranging from $220,000 to more than $300,000 per year) went to former superintendents. The remaining top spot went to a research professor. Not one of the 15 retired as a school teacher, and all but one were men.

Not much has changed in 2016. Using the updated database, we examined the top 15 pensioners and found that 14 of them are former superintendents -- that research professor is still the lone standout. Two more women joined the mix though, bringing our total to three out of 15.

The NYSTRS benefit calculations explain why administrators are so heavily favored. NYSTRS maximum benefits are calculated using the following formula: Pension Factor x Age Factor (if applicable) x Final Average Salary = Maximum Annual Pension. The pension factor represents years of service, the age factor allows for a possible reduction should a member choose to retire early, and the final average salary is derived from a member's highest three or five consecutive school year salaries, depending on when he or she enrolled. Administrators (who are disporportinately male) outearn teachers; their average final salaries are much higher, leaving them ahead not only during their working years, but into retirement as well. The predominantly female teacher workforce is paying into the same system -- but getting far less. And unlike a system like Social Security, which awards lower-paid workers with proportionately higher retirement benefits, teacher pension systems include no such protections.

The chart below shows NYSTRS's gender breakdown. There are 204,184 actively enrolled females versus 63,351 men. Additionally, there are about twice as many female retirees as males, suggesting that males may be more likely to eventually draw any pension at all. But while the system is comprised mostly of female members, the system's biggest beneficiaries are overwhelmingly male.

New York's gender discrepancies are a product of the state's pension plan, not some fluke. They are simply one byproduct of a system that creates a small group of pension winners at the expense of the majority of employees who lose out under pension systems -- in New York, 60 percent of new teachers will not qualify for any pension at all (let alone a generous one). Pensions are often billed as especially beneficial to women -- and, if a teacher were to spend the entirety of her career, 25-30 years, in the same system, she would earn a comfortable retirement. But we know that this isn't the case for the majority of teachers. All teachers, especially those who have been historically underpaid, deserve a fair, portable retirement plan.

Nearly 100 years ago, states created teacher pension plans that were designed to serve a particular group of educators, especially women, who never married or had children. The publicly-funded systems were justified as protection for women who had taught for their full professional career, who likely didn’t have much in the way of personal retirement savings and would otherwise go without retirement support.

Pensions have evolved somewhat over time, but they’ve never escaped this original intent. Today, pensions provide financial security for those teachers that stay in the profession, but they also quietly push out veteran teachers. These leaders may have more to give to the classroom, but they are financially penalized for doing so. In a new paper from the National Bureau of Economic Research, Maria Fitzpatrick suggests those incentive structures may be having an impact on women's retirement rates more broadly.

Fitzgerald found that between 2000 and 2010, labor force participation rates of college-educated women between the ages of 60 and 64 jumped 20 percent. At the same time, as shown in the figure below, a lower proportion of these college-educated women were ever teachers. Fitzgerald’s paper suggests this is because fewer college-educated women are becoming teachers.

This has several implications. One, it’s a tangible sign that college-educated women have more career options than they did in the past. Whereas 30-40 percent of college-educated women born in the first part of the 20th century became teachers, today that figure is closer to 15 percent. The expansion of opportunities for women is undoubtedly a good thing, no question, but it also meant a smaller potential labor pool for schools.

Two, because 90 percent of teachers are enrolled in defined benefit pension plans that push out veteran teachers, these demographic trends have widened the gap in retirement ages. Figure 6 from Fitzpatrick’s paper shows that female teachers are exiting the workforce sooner than their non-teaching peers. Fitzpatrick argues that this is linked to teachers’ participation in defined benefit pension plans, which encourage retirement at ages earlier than Social Security. That disconnect, where teachers have earlier retirement ages and longer retirement periods, has broader societal and cost implications.

So what does this mean? Recent National Center for Education Statistics data show that retirement security is a driving factor in teachers’ career decisions. So much so, in fact, that the ability to maintain teacher retirement benefits ranked above salary, class size, and child care availability in teachers who had left the classroom’s decisions to return. Effective, veteran teachers deserve fair retirement savings plans that continue to grow in value, rather than arbitrarily peaking and plummeting at a set age. Pensions aren’t keeping up with a changing society.

Everyone knows that teacher turnover rates are rising. So even though they’ve declined a bit recently, over the long term, national teacher turnover rates are up.

But what if the national, composite data aren’t the right way to look at teacher retention?

As I’ve written before, overall teacher retention rates are partly a function of teacher demographics. In general, retention rates for all workers -- teachers included -- follow something of a U-shaped pattern. Turnover rates are high for teachers early in their careers, decline over time and plateau mid-career, and then rise again near retirement. So if you combine all teachers into one overall average, your results will depend on what proportion of teachers fall into each of these career stages.

A better way to think about teacher retention would be to look at how many teachers reach various career milestones. That would allow a cleaner apples-to-apples comparison by looking at teachers who began their careers at different points in time. The National Center for Education Statistics (NCES) runs regular surveys that follow cohorts of teachers for a few years, but there’s no national dataset that I'm aware of that tracks individual teachers over long periods of time.

We can, however, use the NCES data to back into a reasonable approximation. NCES breaks down turnover rates* by teacher experience levels (1-3, 4-9, 10-19, and 20+ years of experience), and they update the data with new survey results every few years. By using these rates and updating them over time, we can synthetically “follow” cohorts as they age into the profession.

For example, NCES’ oldest teacher survey began in 1987-88. In that year, it found that 8.3 percent of teachers with 1-3 years of experience left the profession (meaning 91.7 percent remained). We can assume this group of teachers had the same turnover rate in years two and three (1988-89 and 1989-90). In year four, this group would jump to a new NCES experience category (teachers with 4-9 years of experience). Additionally, NCES released a new set of estimates in 1990-91, so the estimates must shift accordingly.

Using this method, I ran the numbers for the cohorts entering in 1987, 1990, 1993, 1999, 2003, 2007, and 2011. The graph below is the result.

The main takeaway from this analysis is that, contrary to conventional wisdom, teacher retention rates don’t seem to be changing that much.** The national averages appear to be deceiving us. Regardless of the year they started, about one-third of teachers had left within five years, and about half were gone within 10 years. Teacher retention doesn’t seem to be changing that much.

Since the graph is somewhat hard to read, here’s what the data look like in table form. Each column represents a starting year, and the rows indicate the cumulative retention rate by years of experience.

What is really going on here? I suspect two dominant trends have been shaping the national narrative about the changing teaching workforce. First, schools lowered student/teacher ratios by hiring more teachers than they lost. That meant schools were hiring lots of inexperienced teachers, which enhanced the feeling of system-wide churn even as underlying rates of teacher turnover didn’t actually change. Specific policy choices led us to a larger but less-experienced teacher workforce.

Second, even as districts were hiring lots of inexperienced teachers, the teaching workforce also got older. Existing teachers got older as the Baby Boom generation aged into the workforce, and even new hires were older than previous cohorts of new teachers. Due to retirement, older workers have high turnover rates, feeding into the feelings of higher churn.

These two trends could have shifted our perceptions of the teacher workforce even as the underlying dynamics didn’t change much at all. The analysis I’ve presented here suggests that the changing mix of teachers employed in our schools may be deceiving us. Teacher turnover rates aren’t rising, but we are employing more teachers who fall into career stages with high turnover. That's a different, more complicated story.

*For simplicity’s sake, I’m counting all teachers who stay in the profession as being retained. That is, I’m assuming retention is 100 percent minus the NCES “leaver” rate. There’s another group of teachers, “movers” who change schools, but this analysis is looking only at overall, cumulative teacher retention on a national basis.

** There are couple distinctions worth noting. First, the 1999, 2003, and 2007 cohorts all have slightly lower retention rates than prior groups of teachers. The differences aren’t that large—only a few percentage points—but they are visible. I don’t have a good explanation for why those years in particular were lower, but it may have been temporary. The cohort that began in 2011 is more in line with the earlier years and, in fact, has the highest 5-year retention rate of any cohort.

There’s also a visible kink at the 20-year mark. While late-career teachers do have high turnover rates, that’s mainly a function of retirement. They show up here at the 20-year mark due to the NCES categories. Because NCES lumps all teachers with 20 or more years of experience into one category, that captures a lot of teachers who are retiring. The high rates of retirement make the entire category have high turnover rates.

Earlier this month I talked about teacher pensions on a panel at the annual summit of the Policy Innovators in Education (PIE-Network). In anticipation of the conference, I spent some time pondering my best arguments for why education advocates should invest their time and political capital in pensions, as opposed to everything else they might want to work on (like Common Core, teacher prep, charter schools, school funding, etc).

Although I do a lot of work on pensions, this is an ongoing internal debate for me personally, because I care deeply about these other things as well. So why do I, and why should education advocates, invest in pension reform? This is my argument, in a short PowerPoint form:

For anyone who has questions about teacher pensions or is interested in learning more about pensions in your state, sign up for our monthly newsletter, watch our 3-minute animated "explainer" video below, or reach out to us directly at teacherpensions-at-bellwethereducation-dot-org. We’d love to hear from you!

We know that traditional pension plans can push veteran teachers out of the classroom. But could pension reform draw them back in?

Survey responses released through a Learning Policy Institute analysis of National Center for Education Statistics data, “Solving the Teacher Shortage,” suggest teachers who left the classroom consider the ability to maintain their retirement benefits very or extremely important in their decision to return. So important, in fact, that pensions rank as a bigger obstacle than salary, class sizes, and child care availability. Here’s the breakdown:

The vast majority of teacher pension plans financially incentivize retiring at a set age, often around 60, regardless of an individual teacher’s situation. Inevitably, there are some effective veteran teachers who must then choose between continuing their work in the classroom and literally losing money. The survey respondents seem to capture a piece of this dilemma — teachers who have left the profession but would consider returning, should their retirement benefits allow them to do so.

We’ve discussed this before, but the push and pull on veteran teachers also has an effect on students. Findings suggest that if experienced educators did not face the pressure of a backloaded retirement system with large peaks and valley, but were instead offered a smooth, steady benefit accrual, more teachers would stay in the classroom for longer. This would increase teacher experience levels, and lead to better outcomes for students.

For some professions, it’s all about: “location, location, location.” For online start-ups, you probably want to be in Silicon Valley. If you want to work on the stock market, head to New York City. But for teachers, where you work doesn’t matter, right?

Wrong.

According to WalletHub’s recent analysis, there is significant variation in teacher job quality from state-to-state.

But WalletHub’s rankings shouldn’t be taken at face value. And, as with any aggregate state ranking, the devil is in the details. About 14 percent of their total Job Opportunity & Completion Rank is based on the cost-adjusted “average” teacher pension in each state.

Evaluating teacher retirement systems based on the average pension is misleading, because the majority of teachers do not even receive a pension. In Washington, D.C., for example, the average teacher pension is extremely high at almost $65,000, but only 29 percent of teachers ever qualify for a pension. So rating D.C.’s pension system on the average benefit of those who remain misrepresents the retirement realities teachers face. Simply put, a state’s average pension value does not provide much useful information about the quality of teachers’ retirement.

There are a couple of ways WalletHub could have evaluated state pension systems more effectively. For example, they could have used a vesting rate. This would grade states on the percentage of teachers that actually qualify for a pension. But even that won’t address other important concerns, such as whether teacher retirement benefits are portable or whether a state’s pension system is financially stable.

In WalletHub’s defense, teacher pensions are complicated. In fact, this points to a larger problem: teachers often lack sufficient information about their retirement. What is the vesting period? Do I qualify for Social Security? What is the retirement age?

The answers to these questions matter.

Most teachers don’t qualify for a pension and around 40 percent of teachers aren’t covered by Social Security. It is unclear how many teachers know these facts. And with many teachers beginning and ending their teaching early in their professional life, it is doubtful that retirement is at the forefront of their minds. Nevertheless, we must do a better job of presenting teachers’ pensions as they actually are: a retirement system that is misaligned with most teachers today.